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What is the primary purpose of closing the accounts when a partnership firm is dissolved?

Answer and explanation

Correct answer: Realise assets and settle liabilities

On dissolution, the firm's business is discontinued. Its assets are realised, and the proceeds are used to settle outside liabilities and the partners' claims. Increasing profit, making new investments, or expanding production is not the purpose of dissolution. Exam tip: associate dissolution with realisation of assets and final settlement of liabilities.

Related tags

Dissolution Of PartnershipClosing BusinessRealisation AccountSettlement Of LiabilitiesClosing The BusinessDissolution Of A Partnership FirmAccountancyClass 12 Mcq

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